Every year, thousands of people choose to set up their own enterprise. This guide looks at why you might decide to run your own enterprise and the different ways of making the move. It considers the positive and negative aspects of each approach.

A good business idea

A good business idea could be an innovation and an invitation, a new product or service, or an original idea or solution to a day-to-day problem. It might also be:

• a gap in the market that you can fill up
• a business related to the work your doing already
• an hobby or an interest that you can turn into a business

Whatever your idea is, you need to be aware that it fits with your needs as an individual, as well as being a viable business proposition. Questions to ask yourself are:

• What is it that you will bring to the business in terms of relevant experience and expertise?
• Is there a market – the need for an idea and the reliable customers willing to buy?
• How big is the market, and how will you reach it?
• Who are your main competitors?
• What is special about your idea and what makes it different from similar products or services already out there?
• How will you fund your business or the idea?
• What might go wrong?

Tested business model

Some self-starters choose a well-trodden path - such as buying an existing business or rights to a franchise - which can carry fewer risks than going it alone.

Benefits:

• It is usually simpler to get finance.
• A market for the product or service will have already been demonstrated.
• A business plan and marketing method will be in place.
• You should have valuable experience to draw on.
• Many of the problems experienced before may have already been discovered and resolved.
• A franchise comes with financial support too.

Disadvantages:

• Some of the businesses that are up for sale may be experiencing difficulties. Make sure you fully understand the reasons for selling, as you may need to invest quite a bit more on top of the purchase price to give it the best chance of growth.
• The rights to a franchise or to sell particular products or services may be expensive.
• With a franchise, there may be a particular way to run the business that you have to stick with.

A surprise business opportunity

Sometimes the possibility of owning your own enterprise can come as a complete surprise. Perhaps you are offered the opportunity to buy out your employer, or take on a family business.

Opportunities like these are like any other business start-ups. You still need lots of personal commitment and you may need to put your own money on the line. You also need to carefully assess the business to make sure it is viable.

Benefits:

• Development, planning and market testing should already be in place.
• There may be established customers, a reliable income, a reputation to capitalise and build on, and a network of useful contacts.
• You probably already have expertise in the commodity or service and a good understanding of the business you’re taking on.

Disadvantages:

• You may be taking on someone else’s problems when you take on the business. Ask yourself if there are problems with the business, and if so, can you solve them?
• If you are buying out your employer, you may lose support services that you take for granted now. You won’t just be responsible for your core role, but for everything else as well, such as accounting, staff management and payroll.

A business with social objectives

You may want to set up a business that isn’t only made for profit but also has a social purpose. For example, you might want to provide a service for a disadvantaged group in your local community or perhaps improve the local environment.

Although any business can include social objectives, you may want to consider setting up a specific type of business known as a social enterprise. Even though a social enterprise is run as a business, and often operates under the same financial and profit-driven pressures, it also aims to offer a clear social benefit. The profits are mostly reinvested, or used to support its social aims, rather than being paid to the owners of the business.

Benefits:

• You earn a living by doing something you believe is worthwhile.
• As your business develops and matures, your community or beneficiary will also benefit.
• Customers may be more willing to buy from a business that supports a good cause.
• It may be easier to motivate and attract employees (or even volunteers) to work in a social enterprise.
• You may qualify for a grant, or be able to raise finance from people or organisations who share the same social aims.

Disadvantages:

• Making profits and attaining your social aims can sometimes conflict with each other. You may have to make difficult choices.
• Although you can earn a reasonable income working for a social enterprise, you will not make your fortune - most of the surplus profits are put back into the business or go to support its aims.

A dramatic personal event

A major life change can often allow you - or enable you - to set up your own business. Maybe a dramatic personal event kick-starts you into action, or your job situation means that now would be the time to take the plunge. Such changes might include:

• redundancy
• unemployment
• a change of family circumstances
• coming into money

Benefits:

• A change in your circumstances might be a chance for you to start over or do something you’ve always wanted to do.
• Redundancy payments or receiving a lump sum of money can offer you the opportunity to invest in a business.
• At its best, being your own boss can give you the flexibility to work around any family commitments.

Disadvantages:

• Major life-changing events can be very stressful and it may be unwise to make any further big decisions at times of personal upheaval.
• Starting your own business is unlikely to offer you a speedy return on your investment and you should be prepared for a long haul.
• In the initial stages especially, running your own business can mean putting in long hours and making sacrifices elsewhere in your personal life.

Taking control of your life

For many individuals, the biggest attraction of starting up a business is the independence provided by being your own boss and the opportunity to create the lifestyle you look for.

Benefits:

• Setting-up an enterprise can offer a career with built-in independence and flexibility.
• Being your own superior can give you the choice to work more convenient hours - such as working around your children’s school hours and holidays.
• You will be able to decide on doing some professional development or training.
• You will be the one behind the wheel, making the choices that will enable you to lead your chosen lifestyle.
• If your enterprise takes off, the payoff in financial and lifestyle terms can be huge.

Disadvantages:

• You may find yourself working longer hours.
• You may find it difficult to separate home life from your work life, especially if you run the business from home, and this can put extra demands on your family and friends.
• Some business owners suffer stress when things are not going so well.
• You should be prepared for the loss of perks such as pension schemes, holiday pay and sick leave.
• It’s quite common to have financial difficulties, especially when you’re starting to set up your business.

Tags: startups